the future of retail report

The Future of Retail Key Trends, Data & Insight

June 2014

© Digital Royalty Inc. 2014

Identify areas of opportunity and learnings that can be applied to Hilton Worldwide initiatives.

Objectives

Provide a comprehensive overview with key insights and trends within the retail industry.

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Methodology


Key Learnings

Customization & Localization

A Consistent Customer Service

Strategy

Unique Mobile Experience

Satisfied Customer

• Big Data + Customer behavior • New technology • Ambassador Programs • Surprise & Delights

• Consistent experience across all channels • Taking care of the issue where it

happens

• Treating it as a lifecycle vs. an app • Customization & Customer Service

Retail Stats


Retail Industry

Value Mobile Social

3 Industry Drivers for E-Commerce


Retail Industry$71.2 billion was the 2014 first quarter US retail e-commerce sales, a 2.8% increase from fourth quarter in 2013. !2.2% is the total retail sales increase and GAFO (General Merchandise, Apparel, Furniture and Other) sales decreased by 0.6% which is a sign that retail is slowing. !25-34 year olds lead the way in smartphone usage in-store, comparing pricing, reviews, buying products and engaging with brands on social while in physical stores. !50% of Millennial’s say they regularly browse for items that they don’t plan to buy. 36% say they only buy items they deem as necessary. One-third are willing to pay full price. !44% of all US commerce transactions in Q1 2014 began by Google Search.

Content sources: The Census Bureau of the Department of Commerce, Custora and CMO (2014)


US Mobile

2013 U.S. mobile commerce sales grew 63% YOY to $34.2 billion

Content sources: 2014 Internet Retailer Mobile 500 Guide, Google Think Insights and Goldman Sachs

2018 U.S. mobile retail sales expected to

grow to $173 billion


UK Mobile

2014 Mobile will account for

24% of retail e-commerce

sales

2017 Mobile will account for

35% of retail e-commerce

Content source: RIS

Key Trends


Big Data •Retail brands are looking to leverage “Big Data” to maximize profits through real-

time analytics that fuel dynamic pricing in store. !•Dynamic pricing will allow brands to make a more customized experience based on

historical trends and POS trends. !•Predictive analysis will allow brands to up-sell offers to customers based on

customer sentiment and past purchase history. This will allow for customer service agents to recommend “next-best-actions.”

!•Big Data will drive $34 billion of IT spending in 2014. !•Major brands such as Target, Gap, Nike and Zappos have invested in innovation

labs that allow them to innovate and introduce new concepts into the market.

Content sources: RIS, brand interviews and Forrester


Brick and Mortar vs. Online •Major retailers (Macy’s, Nordstrom, J.C. Penney’s, etc.) are concentrating their

stores as “Hub Destination Centers” (HDC) to combat online buying and compel consumers to visit the stores rather than strictly purchase online.

!•While online specific brands such as Amazon and Rent the Runway have brick

and mortar locations on their roadmap, major retailers are closing locations. !•2014 is the year when retailers are focusing efforts on making a seamless

customer experience from online to mobile and in-store.

Content sources: Forbes, Future of Commerce


Showrooming vs. Webrooming

Showrooming The practice of examining merchandise in a traditional brick and mortar retail store without purchasing it, but then shopping online to find a lower price for the same item. Online stores often offer lower prices more frequent than their brick and mortar counterparts, because they do not have the same overhead cost. !Webrooming The new and emerging showrooming, meaning customers will do their research online but ultimately buy products offline or in-store.


Differentiators

Content source: Merchant Warehouse


Showrooming vs. Webrooming Stats

Content source: Merchant Warehouse

69% of people with smartphones in the 18-36 year demo have web roomed, while vs. 50% have showroomed. !71% of people 37-48 years have webroomed vs. 53% who have showroomed. !$1.8 trillion in sales will result from webrooming by 2017, versus $1.2 trillion in 2012. !

$307 billion in all e-commerce sales in 2017.


Customer Service Evolution •As social evolves, it requires a greater transparency for brands. •Brands are focusing on creating a seamless omni-channel experience for the

consumer whether on mobile, desktop or in-store. •Brands are investing in dedicated social media customer service teams that are

trained to handle customer service issues where they take place. •Although voice is still the most preferred customer service channel for consumers, live

chat and virtual agents are becoming popular as they provide customer ease. •Pre-purchase and post-purchase engagement will become more popular, as brands

monitor how customers interact with the company, navigate websites and spend time on specific pages. This insight coupled with “big data” will allow brands to contact consumers directly through chat, offers, email or through social channels.

Content source: Forrester, 2014


New Technology Shoppable Videos: !

• Shoppable videos provide a unique experience for consumers that allows them to shop the look/product of a video while consuming.

•Some videos become too distracting and take-away from the content of the video.

•Target developed a series with well-known talent that allows consumers to shop the look on the right hand side while watching the video.


Niche Brands & Collaborations

•Niche brands & collaborations are becoming more popular and are targeting Millennial’s and customer ease.

•Customizable based on clothing preferences determined during sign-up phase and then curated collections based on interest.

•Subscriber base service and encourage consumer collaboration/feedback.

•Ambassador program and localized through meet-up events. •Hunt Club: VIP customers who receive free shipping, returns,

discounts and try-on service.


International Trends•E-Commerce Growth: 2014 is expected to be the first time that consumers in Asia-Pacific will spend

more on e-commerce purchases than those in the US. Argentina, Mexico, Brazil, Russia, Italy and Canada also expected to drive worldwide e-commerce growth. Growth largely to do with large populations and first time online shoppers.

!•Globalization: Fueled by consumer preferences and localization. Additionally growth in emerging

markets will impact globalization. Shoppers continue to spend an increased amount online year over year in China. Online sales expected to reach $650 billion by 2020, up from $210 billion in 2012.

!•Cross-Boarder Presence: Retailers are establishing a presence in Asia-Pacific regions as well as the four

BRIC countries: Brazil, Russia, India and China, which account for more than 40% of the worlds population. This will allow for retailers to have faster shipping periods, lower shipping costs and localization.

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!!Content sources: McKinsey & Co., eMarketer,

Supporting Data


Methodology

•Listening software was manually trained to analyze global conversation surrounding “online retail” and the “shopping experience” from 2011 to current.

!•Data has been pulled from websites, forums, blogs, Twitter, Facebook. !•There are more than 11 million relevant posts that are being analyzed to provide the

following slides. !


Demographics

Demographics provided for 2011 - current surrounding the conversation of retail / online shopping.


Conversation Volume

Relevant conversation continues to increase surrounding online shopping as irrelevant volume stays consistently low. !!

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Consumer Sentiment Consumer sentiment (blue) of “Online Conversation” around shopping experience has steadily increased over the past three years. !This significant increase in conversation proves the importance of a brands online presence and customer service strategy.

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Content SourcesConversation around retail and online shopping experiences includes posts on the following outlets. Since 2011, the conversation has increased exponentially on Twitter. Twitter conversation has increased 15% since 2011: !•Twitter: 77% •Blogs: 13% •Forums: 5% •News: 3% •Facebook: 2% !!


Conversation

2011 2014

Analysis of Brands


Zappos • Customer Experience: Personalization is key for customers, and larger brands are struggling to

compete with curated experiences. Zappos competed with this through their niche speciality brand. !

• Mobile Strategy: Mobile continues to grow, with higher consumer spending, specifically amongst loyalists. Approach mobile strategy as a consumer lifecycle vs. an application. Key is not to over-serve with push notifications. Zappos has specialized teams working on each version of the app, i.e. iOS vs. Tablet.

!• VIP Customers: All consumers are VIPs. Premium customers purchase 3x a year. Surprise &

Delight is a marketing strategy with the main goal for the consumer to be attracted to Zappos. Social team has free-reign to surprise & delight as often as they see fit.

!• Customer service best practices: Refer to the customer by name, send them directly where

they need to go and match the same level of service as the phone. Deal with the customer service issues where it takes place, i.e. Twitter vs. having them email customer service or directly them elsewhere.

!• Social Revenue: Facebook drives 80% of social revenue, Pinterest drives 17% and Twitter

equates to 2%. !Content source: Zappos


Mobile Experience

•Zappos’s mobile experience incorporates their customer service approach, through easy one-click access to call-center and live chat features. !

•Products have the ability to be sorted as pleased, including recently viewed, highest priced and most popular.


Online Marketing

Unique customer targeting through banner ads reminding customers to continue their incomplete shopping experience. !


lululemon • Mobile: Mobile buying habits are increasing and mobile is a huge initiative for 2014/2015

including push notification strategy. !• Click to Buy: lululemon is focusing their efforts on other non-traditional digital sites that drive

click to buy, including Wanelo, and have seen large dividends. !• International: Growth in Asia is a top priority and dedicated resources have been

implemented to place boots on the ground. !• Social Revenue: 40% of social revenue is generated by Facebook, 14% from Pinterest. Email

open rate is 50% and is the #1 driver to site. !• Customer Segmentation: Customer and product segmentation for all international markets,

US to Hong Kong and Canada is a priority for 2014/2015 to provide a unique experience. Heavy focus mens wear and creating a unique marketing strategy from that of the women’s.

!• Loyalty: Increasing surprise and delight budget to give customer service the freedom to

implement as needed. !• Content Strategy: Inspirational and pre-roll content performs the best. Emotional connection

is important for the target audience. !Content source: lululemon


Customization

lululemon’s website is structured based on whether you are female or male. Once that’s established the shopper has the ability to determine which type of “athlete” they are to continue their shopping experience. Their current site is mobile friendly, but a dedicated app is on the horizon.


Content: Inspirational

•Content is highly visual and focuses on inspiring brand fans with a dominate focus on the mens line. •Ambassador strategy (loyalists) includes YouTube series that feature a day-in-the-life to inspire consumers.

Major Financial Institution


Major Financial Institution • International Approach: The Brand first starts with a deep understanding of what’s important to consumers’ lives and

what matters to them. From there, brand a strategy is developed to maximize their gains and minimize their pains. !• Social Impact on Industry: Increased demands for greater transparency, better customer experience, more responsive

customer service. Social has also impacted the rise in online banking (remote deposits, online bill pay and transfers) and less reliance on visits to the bank.

!• Future of banking: There will be an emphasis on overall customer experience and the use of predictive analytics to

better serve customer needs. !• Mobile Impact: Mobile banking creates less friction, thereby making the experience easier, quicker and more pleasant

to purchase and bank. !• Future of Banking: Data will be used to predict needs to better serve customers. Consumers have higher expectations

when it comes to customized experiences. !

Content source: Asked to remain anonymous

Shared Services


Rise of Shared Services

Content source: uber, airbnb, fobes.com

•The sharing economy had projected revenues of $3.5 billion in 2013. !•Millennial’s are culturally programmed to borrow, rent and share. !•An estimated $1 Billion in yearly gross bookings. !•A trend is being seen amongst larger retailers, including Home Depot who now rent

products from more than 2,000 stores. In 2011, GM invested more than $3 million in their ride share programed called RelayRides to compete.

!•More than 7 Million people are global members of a car-sharing service. !

http://fobes.com


In 2008 there were 120,000 listings and in 2012 there were 300,000 listings with 3 million guests who traveled.

Content source: Airbnb

© Digital Royalty Inc. 2014Content source: Forbes 2013 and Airbnb

•Airbnb is in 192 countries. !•Where travelers come from (in descending order): US, UK, France, Spain, Australia

Germany, Canada, Russia, Brazil, Singapore, Hong Kong. !•14% of Airbnb customers said they wouldn’t have visited the city without Airbnb. !•42% of hosts use the income to pay everyday living expenses. !•“Spillover Effect” - Airbnb rentals tend to be cheaper than a hotel, which encourages

people to travel longer and spend an average of $1,100 in a city, compared to hotel guests.

© Digital Royalty Inc. 2014Content source: TechCrunch 2013 & uber.com

•In more than 70 cities (including global). !•An estimated $1 Billion in yearly gross bookings. !•An average of 80,000 sign-ups a week. !•Strategy is driven by unique partnerships/alignments. !

http://uber.com


Unique Partnership

•Uber and AT&T joined forces to deliver seamless Uber access to customers by pre-loading the app on Android carriers phones.

!•News came after Google announced they were adding

Uber data to their maps. !

Social Platforms


The Stats

Content source: Compete 2013


The Stats

Content sources: Twitter 2014


Paid Products

Content source: Twitter 2014

•Website Cards: Allows retailers to drive to web with a rich product specific experience within the card.

!•Lead Gen Cards: Allows retailers/brands to grow their CRM

database directly through a Twitter card. !•App Cards: Brands can promote a mobile app and encourage

sign-up directly from the card within a users timeline. !•Click to Call (not available yet): This product will further

enhance the customer service experience for consumers, allowing followers of a brand the ability to call a brand with a single click in a promoted tweet.

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Case Study - Amazon Cart

Content source: Amazon 2014

•#AmazonCart: Once a shopper has a Amazon cart/account, all they have to do is reply to a tweet with an amazon link and use the hashtag #AmazonCart and it will save within the cart. This allows the product to stay top of mind and give purchasing ease.

!•Purchasing Cycle: Combining the Twitter TV Conversation ad

products and TV spots, brands can encourage consumers to purchase products via TV spots and also reach them on Twitter while they are watching. 65% of Twitter users access Twitter when watching TV.

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•Pinterest shoppers are spending significantly more per checkout averaging between $140 - $180 per order compared to non-Pinterest users which average $80-$60.

!•Mom’s are 61% more likely to visit Pinterest than the

average American. !•70% of brand engagement is generated by users, not

brands. !•18% of engagement for fashion and retail brands is

generated by brands, 82% generated by users.

Content Sources: Nielsen, Rich Relevance, Digitas


Paid Products

•Rich Pins: Provide a unique experience for users, and includes product information and pricing.

!•Promoted Pins: A paid product offered by

Pinterest that partner brands pins will appear on the search and category feeds.


Case Study Customization: !•Nordstrom has more than 4.4

million followers on Pinterest. •To enhance the user experience,

they’ve created a “Popular Pinned” section on their website and incorporated an in-store Popular Pinned products display.

•This not only eases the customer experience, but also increases awareness of their online presence.


!!•10.5 billion minutes are spent on Facebook each day. !•Of the social outlets, Facebook is the highest referrer

of site traffic, at 63%. !

•Facebook tops conversion rates when compared to other social channels.

!•Facebook users typically only make one action on

Facebook, i.e. Like, Click, Share. That insight should be reflective in content based on whether the goal is to convert a sale/purchase.

Content source: Shopify 2014


Paid Products & Targeting•Autoplay Videos: Allow retails to drive to web with a rich

product specific experience within the card. !•Paid Posts with Call-to-Action: Designed to drive to web and

encourage purchase. !•Targeting: Facebook’s advanced targeting allows for brands to

deliver highly targeted content to consumers. Targeting includes: Look-A-Like Audience Targeting, Demographic Targeting (life events, relationships, generations), Demographic targeting (net worth, education, industry, home value, life events, political status/affinity). !

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!!•45 million users globally. !•Users are 352% more likely than the mobile

average to find a store location on their mobile phone.

!•Foursquare users are 326% more likely than

average mobile users to check product availability in-store. !

•Users are 206% more likely than the mobile average to have purchased goods/services in a month.

Reach People Based on Real World BehaviorContent Sources: Comscore Mobilens, 2014


!!•Post Check-In Ads: Brands can serve consumers

Post Check-In ads after they’ve checked at a specific location, i.e. lululemon could target yogi’s who check in at a local yoga studio with a special offer.

!•Offers: Offers are ads that appear at the top of a

users timeline or send alerts for nearby locations and help drive foot traffic into a retail/physical location.

Reach People Based on Real World BehaviorContent Sources: Comscore Mobilens, 2014

Paid Products


YouTube •According to Google, YouTube influences

purchase more strongly than that of TV. •The top 500 brands on YouTube grew

their views by 70% in 2013. •187.8 million people in the US watched

46.6 billion online content videos in March 2014. The average American spent more than 17 hours watching online video.

Content source: Google TNS October 2013


Shoppable Videos

Click to purchase Product Feature

Interactive navigation bar

Drive to web.

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